China Non-Manufacturing Industries Contracted in February

March 3 (Bloomberg) -- China’s non-manufacturing industries
contracted for the first time in three months in February,
adding to signs the world’s second-biggest economy is weakening.

The non-manufacturing purchasing managers’ index fell to
48.4 from 52.9 in January, the National Bureau of Statistics and
China Federation of Logistics and Purchasing said in a statement
today in Beijing. A reading above 50 indicates an expansion.

Today’s data may increase concerns that the economy will
see a deeper slowdown after a decline in overseas sales and
weaker-than-forecast lending in January. The central bank cut
lenders’ reserve requirements last month for the second time in
three months to spur lending and sustain expansion.

“After the spring festival because there was a clear
decline in the main consumer industries retail and catering,
this is the main reason for the decline in overall economic
activity,” Cai Jin, a federation vice chairman, said in the
statement. “Construction activities started to restore growth,
and even though demand continued to decline, the decline is
slowing.”

Economic data in the first two months are distorted by the
weeklong Chinese New Year holiday, which fell in January this
year and February last year. The real estate industry rebounded
last month, Cai said.

The federation’s non-manufacturing PMI is based on a survey
of about 1,200 companies in 20 industries including
transportation, real estate, retailing, catering and software.

Lu Ting, a Hong Kong-based economist with Bank of America
Corp., previously described the gauge as low-quality data,
subject to seasonal distortions and with much less “predictive
power” than equivalent surveys for manufacturing.

A separate manufacturing gauge released by the federation
on March 1 showed a third straight month of improvement in
February, rising to 51, the highest level since September. Brian
Jackson, a Hong Kong-based economist with Royal Bank of Canada,
said the reading should reinforce confidence that China is
avoiding a “hard landing.”